Renren Games, the online gaming business of Chinese social network Renren, began a mass layoff — it is reported it’s about 50% – 60% of some 700 employees — from early this month.

Joseph Chen, CEO of Renren, confirmed it in an internal e-mail yesterday. He acknowledged the irrational expansion and declining of Renren Games in the past quarters. But he said their eventual goal was still have Renren Games go IPO.

He wrote in the e-mail that the performance of the gaming business in the past quarters isn’t satisfying that was “from high growth to low growth and then to negative growth. Although it has something to do with the harsh market conditions in the domestic market, … it has a lot to do with execution and control.”

Renren Games was spun off in July 2012 for a possible IPO. Online games, developed in-house, accounted for 45%, 35.8% and 51.2% of Renren’s total revenues in 2010, 2011 and 2012, respectively.  It has been Renren’s only profitable business.

Something went wrong from early this year. In Q2 2013, Renren Games only saw 1.4% year-over-year increase in revenue, compared to 117% and 52.9% in previous two quarters.

Some key members of Renren left the company earlier this year that include the Chief Marketing Officer and the GM of Renren’s mobile division. He Chuan, CEO of Renren Games, now is on sick leave. Liu Jian, COO of Renren, is overseeing the day-to-day operations of Renren Games.

Last month the rumor said that Renren was looking to sell all businesses excluding Renren Games. Joseph Chen managed to get Baidu to acquire a 59% stake in Nuomi, Renren’s group-buying service founded in 2010 and another money-losing business.